Post on 20-Feb-2021
transcript
4Q 2020 Earnings Call25 November 2020
John Deere | 4Q 2020 Earnings Call | November 25, 20202
Safe Harbor Statement & Disclosures
The earnings call and accompanying material include forward-looking comments and information concerning the company’s
plans and projections for the future, including estimates and assumptions with respect to economic, political, technological,
weather, market acceptance, acquisitions and divestitures of businesses, anticipated transaction costs, the integration of new
businesses, anticipated benefits of acquisitions, and other factors that impact our businesses and customers. They also may
include financial measures that are not in conformance with accounting principles generally accepted in the United States of
America (GAAP). Words such as “forecast,” “projection,” “outlook,” “prospects,” “expected,” “estimated,” “will,” “plan,”
“anticipate,” “intend,” “believe,” or other similar words or phrases often identify forward-looking statements. Actual results may
differ materially from those projected in these forward-looking statements based on a number of factors and uncertainties,
including those related to the effects of the COVID-19 pandemic. Additional information concerning factors that could cause
actual results to differ materially is contained in the company’s most recent Form 8-K and periodic report filed with the U.S.
Securities and Exchange Commission, and is incorporated by reference herein. Investors should refer to and consider the
incorporated information on risks and uncertainties in addition to the information presented here. The company, except as
required by law, undertakes no obligation to update or revise its forward-looking statements whether as a result of new
developments or otherwise. The call and accompanying materials are not an offer to sell or a solicitation of offers to buy any of
the company’s securities.
John Deere | 4Q 2020 Earnings Call | November 25, 20203
FY 2020 Results($ millions except where noted)
$39,258$35,540
FY 2019 FY 2020
$34,886$31,272
FY 2019 FY 2020
$3,253
$2,751
FY 2019 FY 2020
$10.15$8.69
FY 2019 FY 2020
10%
Net Sales &
Revenues
Net Sales(Equipment Operations)
Net Income(attributable to
Deere & Company)
Diluted EPS($ per share)
9% 15% 14%
John Deere | 4Q 2020 Earnings Call | November 25, 20204
4Q 2020 Results($ millions except where noted)
$9,896 $9,731
4Q 2019 4Q 2020
$8,703 $8,659
4Q 2019 4Q 2020
$722 $757
4Q 2019 4Q 2020
$2.27 $2.39
4Q 2019 4Q 2020
1%
Net Sales &
Revenues
Net Sales(Equipment Operations)
Net Income(attributable to
Deere & Company)
Diluted EPS($ per share)
2% 5% 5%
John Deere | 4Q 2020 Earnings Call | November 25, 20205
Worldwide Agriculture & Turf
4Q 2020 Results $ in millions
$5,756$6,198
4Q 2019 4Q 2020
Net Sales 8%
$860
$68
($153)
($4)
$527
$314 ($20) $33 ($28)
$123
4Q19 Volume/Mix
Price Currency Warranty ProductionCosts
SA&G/R&D
SpecialItems
Other 4Q20
Operating Profit Comparison
John Deere | 4Q 2020 Earnings Call | November 25, 20206
Regional Ag Commentary
NORTH AMERICA SOUTH AMERICA
EUROPE ASIA
– Key markets return to growth
– Results benefiting from portfolio strategy
– Stable market supported by strong wheat prices
– Mixed conditions by region
– Focused strategy driving results
– Strong grain production and profitability in
Brazil
– Lean inventories and healthy order books
– Improved sentiment driven by prices, market
access and government support
– Lean new and healthy used inventory levels
– Order book reflects positive fundamentals
John Deere | 4Q 2020 Earnings Call | November 25, 20207
Agriculture & Turf
Industry Outlook – FY 2021
Source: Deere & Company forecast as of 25 November 2020
U.S. & CANADA AG EUROPE AG SOUTH AMERICA AG(tractors and combines)
ASIA AG U.S. & CANADA TURF & UTILITY
5-10% Flat to up 5% ~5%
Flat to up 5%Slightly
John Deere | 4Q 2020 Earnings Call | November 25, 20208
13.3%
FY 2020 FY 2021 Fcst
Worldwide Agriculture & Turf
Divisional Outlook
$22,325
FY 2020 FY 2021 Fcst
NET SALES
15.5-16.5%
OPERATING MARGIN
Source: Deere & Company forecast as of 25 November 2020
10-15%
John Deere | 4Q 2020 Earnings Call | November 25, 20209
Worldwide Construction & Forestry
4Q 2020 Results $ in millions
$2,947
$2,461
4Q 2019 4Q 2020
Net Sales 16%
$196
($154)
$19
$19
$20 ($76)
$261
$94 ($1) $14
4Q19 Volume/Mix
Price Currency Warranty ProductionCosts
SA&G/R&D
SpecialItems
Other 4Q20
Operating Profit Comparison
John Deere | 4Q 2020 Earnings Call | November 25, 202010
Construction & Forestry
Industry Outlook – FY 2021
Source: Deere & Company forecast as of 25 November 2020
NORTH AMERICA COMPACT
CONSTRUCTION EQUIPMENT
~5%
GLOBAL FORESTRY
Flat to up 5%
NORTH AMERICA
CONSTRUCTION EQUIPMENT
~5%
John Deere | 4Q 2020 Earnings Call | November 25, 202011
6.6%
FY 2020 FY 2021 Fcst
Worldwide Construction & Forestry
Divisional Outlook
Source: Deere & Company forecast as of 25 November 2020
$8,947
FY 2020 FY 2021 Fcst
NET SALES
9-10%
OPERATING MARGIN
5-10%
John Deere | 4Q 2020 Earnings Call | November 25, 202012
Worldwide Financial Services
Net Income - Results and Outlook
Source: Deere & Company forecast as of 25 November 2020
$90
$186
4Q 2019 4Q 2020
Quarter Results Fiscal Year Results and Outlook
$566 $630
FY 2020 FY 2021 Fcst
John Deere | 4Q 2020 Earnings Call | November 25, 202013
Deere Technology Stack
Full set of solutions,
connected together and to
our machines helping
customers perform jobs better
increasing their productivity,
profitability and sustainability.Hardware & Software
Guidance
Connectivity & Digital Solutions
Automation/Machine IQ
Autonomy
John Deere | 4Q 2020 Earnings Call | November 25, 202014
Evolution of our Technology Stack
Hardware & Software
Guidance
Automation/Machine IQ
Autonomy
1999
Phoenix International
Electronic Hardware
NavCom
GuidanceManufacturing
Section
Control
AutoTrac
JD Link
in Base
Operations
Center
Combine Advisor
Artificial
Intelligence
Blue River
Technologies
Computer Vision & Machine Learning
2020+
Harvest ProfitFarm Profitability Management
AutoPathTurn
Automation
Gen4
Integrated Display
Starfire RTK
Connected
Support
ExactEmerge/
ExactApply
Connectivity &
Digital Solutions
John Deere | 4Q 2020 Earnings Call | November 25, 202015
Opportunity to Deliver Differentiated Customer Value
TECH STACK
John Deere | 4Q 2020 Earnings Call | November 25, 202016
Deere & Company Outlook
Effective
Tax Rate*
Net Income(attributable to Deere & Co.)
26-28%$3.6-4.0B
FY 2021 FORECAST
Net Operating
Cash Flow*
$3.8-4.2B
*Equipment Operations
Source: Deere & Company forecast as of 25 November 2020
John Deere | 4Q 2020 Earnings Call | November 25, 202017
Appendix
John Deere | 4Q 2020 Earnings Call | November 25, 202018
($ millions) 4Q 2020 FY 2020
FY 2021
Forecast
COS (percent of Net Sales)* 75% 76% ~74%
SA&G* 6% 5% ~3%
Research and Development* 9% 8% Flat
Capital Expenditures $816 ~ $900
Pension/OPEB Expense $107 ~ $150
Pension/OPEB Contributions $951 ~ $950
Other Financial Information
Equipment Operations
*As reported (including Employee Separation Expense in 2020)
Source: Deere & Company forecast as of 25 November 2020
John Deere | 4Q 2020 Earnings Call | November 25, 202019
October 2020 Retail Sales (Rolling 3 Months)
and Dealer Inventories
Retail Sales
U.S. and Canada Ag Industry* Deere**
2WD Tractors (< 40 PTO hp) 22% Single digit
2WD Tractors (40 < 100 PTO hp) 12% Single digit
2WD Tractors (100+ PTO hp) 4% Flat
4WD Tractors 19% In line with the industry
Combines 9% Low single digit
Deere Dealer Inventories***
U.S. and Canada Ag 2020 2019
2WD Tractors (100+ PTO hp) 21% 27%
Combines 4% 9%
* As reported by the Association of Equipment Manufacturers
** As reported to the Association of Equipment Manufacturers
*** In units as a % of trailing 12 months retail sales, as reported to the Association of Equipment Manufacturers
John Deere | 4Q 2020 Earnings Call | November 25, 202020
Retail Sales
U.S. and Canada Deere*
Selected Turf & Utility Equipment Single digit
Construction & Forestry
First-in-the-Dirt
Settlements
Double digits
Double digits
October 2020 Retail Sales (Rolling 3 Months)
Retail Sales
Europe Ag Deere*
Tractors Single digit
Combines Single digit
* Based on internal sales reports
John Deere | 4Q 2020 Earnings Call | November 25, 202021
Deere Use-of-Cash Priorities
SHARE
REPURCHASE
Manage the balance sheet, including liquidity, to support a rating that provides
access to low-cost and readily available short- and long-term funding
mechanisms (reflects the strategic nature of our financial services operation)
Fund value-creating investments in our businesses
Consistently and moderately raise dividend targeting a 25%-35% payout ratio
of mid-cycle earnings
Consider share repurchase as a means to deploy excess cash to
shareholders, once above requirements are met
COMMITTED
TO “A” RATING
FUND OPERATING
& GROWTH NEEDS
COMMON STOCK
DIVIDEND
CASH FROM OPERATIONS
John Deere | 4Q 2020 Earnings Call | November 25, 202022
Deere & Company’s 1Q 2021 earnings
call is scheduled for 9:00 a.m. central time
on Friday, 19 February 2021.